Cit vs Kwality Restaurant & Ice-Cream
2001 Latest Caselaw 1057 Del

JUDGMENT

At the instance of the revenue, the following questions have been referred for opinion of this court under section 256(1) of the Act, 1961 (hereinafter referred to as the Act) by the Tribunal, Delhi Bench :

"1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessment in question stood merged with the first appellate order and, hence, it was no longer open to the Commissioner, Central II, after 28-10-1978 to exercise revisional jurisdiction ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that assessed's liability to pay sales tax had not within the meaning of section 41(1) of the Income Tax Act, closed on 27-3-1974, the date of Delhi High Court's decision, but would cease in the later previous year, namely, on the date when Supreme Court decides the Delhi Administration's appeal; against the Delhi High Court's decision?"

2. Dispute relates to the assessment year 1975-76. Previous year ended on 31-12-1974. Originally the assessment was completed on 27-3-1978. Subsequently, proceedings under section 263 of the Act were initiated and the assessment was enhanced to Rs. 10,43,422. The said figure comprised of two items of Rs. 4,000 and Rs. 10,39,422.

2. Dispute relates to the assessment year 1975-76. Previous year ended on 31-12-1974. Originally the assessment was completed on 27-3-1978. Subsequently, proceedings under section 263 of the Act were initiated and the assessment was enhanced to Rs. 10,43,422. The said figure comprised of two items of Rs. 4,000 and Rs. 10,39,422.

3. The assessed preferred an appeal before the Tribunal. Mainly two contentions were raised. Firstly, that order of assessment had merged with the first appellate order dated 28-10-1978 and, therefore, no notice could have been issued under section 263. It was urged that the Commissioner was not competent to invoke the revisional power because the order had merged with the appellant order. It was, however, accepted that grounds raised at the first appellate stage did not cover the aforesaid two items.

3. The assessed preferred an appeal before the Tribunal. Mainly two contentions were raised. Firstly, that order of assessment had merged with the first appellate order dated 28-10-1978 and, therefore, no notice could have been issued under section 263. It was urged that the Commissioner was not competent to invoke the revisional power because the order had merged with the appellant order. It was, however, accepted that grounds raised at the first appellate stage did not cover the aforesaid two items.

4. The Tribunal held that the assessed's plea was to be accepted. However, it also decided the issues involved on merits. So far as the sum of Rs. 10,30,422 is concerned it was noted that Rs. 1,84,914 related to tax liability which had arisen during the assessment year in question. So far as balance amount is concerned, it was noted that Delhi High Court's decision dated 27-3-1974 holding that no sales tax was chargeable on sales of milk product (including ice-cream) had been the subject-matter of challenge before the Apex Court in March, 1977, i.e., before completion of assessment in 1978. Therefore, it was held that section 41(1) of the Act had full application to the facts of the case. Accordingly, it was held that the claim was allowable under section 41(1) so far as the assessment year 1975-76 is concerned.

4. The Tribunal held that the assessed's plea was to be accepted. However, it also decided the issues involved on merits. So far as the sum of Rs. 10,30,422 is concerned it was noted that Rs. 1,84,914 related to tax liability which had arisen during the assessment year in question. So far as balance amount is concerned, it was noted that Delhi High Court's decision dated 27-3-1974 holding that no sales tax was chargeable on sales of milk product (including ice-cream) had been the subject-matter of challenge before the Apex Court in March, 1977, i.e., before completion of assessment in 1978. Therefore, it was held that section 41(1) of the Act had full application to the facts of the case. Accordingly, it was held that the claim was allowable under section 41(1) so far as the assessment year 1975-76 is concerned.

5. On being moved for reference, questions as set out above have been referred for opinion of this court. We shall deal with the second question first. In the light of what has been held by the Apex Court in Union of India v. J.K. Synthetics Ltd. (1993) 199 ITR 14 (SC), view of the Tribunal does not suffer from any infirmity and the view expressed by the Apex Court is fully applicable to the facts of the present case. The second question, therefore, is answered in favor of the revenue. Coming to the first question, in view of the answer to the second question, the first question is rendered academic but it is to be noted that in view of what has been stated in CIT v. Arbuda Mills (1998) 231 ITR 50 (SC), the Tribunal's view was not correct. Therefore, the first question is answered in the negative in favor of the revenue and against the assessed.

5. On being moved for reference, questions as set out above have been referred for opinion of this court. We shall deal with the second question first. In the light of what has been held by the Apex Court in Union of India v. J.K. Synthetics Ltd. (1993) 199 ITR 14 (SC), view of the Tribunal does not suffer from any infirmity and the view expressed by the Apex Court is fully applicable to the facts of the present case. The second question, therefore, is answered in favor of the revenue. Coming to the first question, in view of the answer to the second question, the first question is rendered academic but it is to be noted that in view of what has been stated in CIT v. Arbuda Mills (1998) 231 ITR 50 (SC), the Tribunal's view was not correct. Therefore, the first question is answered in the negative in favor of the revenue and against the assessed.

6. Reference is disposed of.

6. Reference is disposed of.